Yes, I have never been keen of the way the MNF business works...

Yes, I have never been keen of the way the MNF business works and I don't think a lot of people understand it, when they compare it with other peers.

Andy Fung and Rene Sugo co-founded both Symbio Networks Pty Ltd and My Net Fone Australia Pty Ltd. Symbio is essentially the wholesale provider - they own the Network and provide the termination. MyNetFone is the retailer.

The waters become muddy when you look at salaries, expenses etc. Including super, Andy Fung and Rene Sugo both brought home $183,120 each. The Remuneration philosophy says "Board is currently to recognize that in the early stage of growth the company needs to contain operating costs and so the salaries established for the executive directors are negotiated at rates below market levels that would normally be available to persons with such experience and qualifications." blah, blah.

What it doesn't say is both Andy Fung and Rene Sugo also work for Symbio, so a) you can't assume they work full time for MyNetFone, nor can you assume they don't get paid by Symbio. The question is, how much does Symbio pay them? If you pay them $2 each, you shift the costs to the public entity MyNetFone. If Symbio pay them $366k and they work roughly 50% for MyNetFone and 50% for Symbio, then Symbio is subsidising MNF. Personally I believe the former is the case.

This doesn't only apply to the two executive directors, I believe there are also other staff who get paid by one entity, and probably do work for both. Rent of the shared business premises is a little more transparent. I believe most of this is on the cash flow statement.

The services contract between Symbio and MyNetFone would be interesting to negotiate if both Andy Fung and Rene Sugo are directors of both entities. I believe this contract was also negotiated ('crafted') and in place prior to the IPO.

So essentially you can shift the costs from one entity to another. It would be interesting to see the books of Symbio - They could be making quite a tidy profit. Obviously Symbio don't have a cash flow problem, if they don't need payment on 30 day terms (Remember they need to pay downstream telco's that provide them the SS7 termination into the PSTN.) They also seem to have some cash when it comes to doing share equity swaps to wipe of some of this debt owed.

Now if you founded both companies, and needed to some extra capital (or dilute some expected losses) would you list the business that is likey to make the best profit, or the other one?